Reuters
UPDATE - UK's CAT sues Abbott over drug royalties
Monday November 17, 7:20 am ET
By Mark Potter
(Adds analyst comment para 7, updates shares para 8)
LONDON, Nov 17 (Reuters) - Britain's Cambridge Antibody Technology Group Plc (London:CAT.L - News; CAT) said on Monday it was taking its partner Abbott Laboratories Inc (NYSE:ABT - News) to court over the level of royalties it receives for its one marketed drug, Humira.
The biotechnology firm had previously hoped mediation would resolve the dispute with the U.S. company, which says it can deduct royalties for third parties from the amount it pays to CAT for Humira, a treatment for rheumatoid arthritis.
"Given the scale of the likely sales of Humira and therefore the scale of likely royalties to CAT, we absolutely have the resources and determination to see this to a successful conclusion," CAT Chief Executive Peter Chambre told Reuters.
He said CAT was sticking to its position that it should get royalties amounting to a mid single digit percentage of Humira sales, which Abbott says could eventually top $1 billion a year.
Companies in charge of selling a drug often have to pay royalties, or a cut of sales, to a number of firms involved in the drug's discovery, development and manufacture.
Analysts were disappointed the case had reached court and concerned at the time and cost of a legal dispute.
"This process will undoubtedly result in further costs and, until resolved (we estimate up to two years), reduced revenues, as Abbott only pays the royalty it believes it owes CAT," said Keith Redpath, an industry analyst at Panmure, who cut his investment rating on CAT shares to "neutral" from "outperform."
At 1200 GMT, the shares were 0.6 percent lower at 477-1/2 pence.
WIDER LOSS
CAT's Chambre said the court case could be resolved in the next 12-18 months. He declined to say how much it might cost but noted that CAT had spent about two million to three million pounds a year during past legal disputes over patents.
CAT, which specialises in developing drugs from antibodies, the body's natural defences against disease, made a net loss of 39.2 million pounds ($66.2 million) in the year to September 30, compared with a loss of 28.2 million pounds the year before.
This left the firm with 107.8 million pounds of cash.
Chambre said CAT would continue to increase spending on a small number of experimental medicines, with net cash outflow likely to rise to about 27 million pounds in the year to September 2004 from 21.9 million the year before.
CAT has enough money to last three years and will bridge the gap to profitability in 2008 by licensing its experimental drugs to partners, striking merger and acquisition deals, selling shares, or a combination of all three, he said.
Chambre said it was likely to recruit a partner for Trabio, an experimental treatment for post-operative scarring in glaucoma patients, after Phase III clinical trials next year. CAT had previously said it might find a partner this year.
(Reporting by Mark Potter
Editing by Anthony Barker
PTD
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